Hulu is a great service, and CEO Jason Kilar is a very smart guy, the Jeff Bezos of television. But he's got a problem. While Amazon.com is independent and Bezos could always screw with publishers and book sellers as much as he wanted, Kilar has limited freedom of choice, and it's likely to become more limited in the near future. Hulu is owned by Fox, NBC and Disney.
It's doing very well, second to YouTube, but WSJ's All Things D has stats showing it has a long way to go. It's owners are probably not patient enough.
There has been a lot of speculation that it will start charging for some shows. Business Week magazine, that poor, dying victim of a takeover by Bloomberg, posted an article on Nov. 24 titled Hulu's Tough Choices: Viewers love the site's free shows, but it's losing a bundle and may soon have to start charging. (Losses are supposedly $33 million a year.)
The most likely dig is that it will start charging for things you have to pay for on TV now, or limiting access to pay-TV shows to people who can prove they're already paying for them through their cable service. The corporate owners face the age-old dilemma of old companies entering into a new business: Fear of cannibalizing their current, obsolescent business model. BW says that the cable-subscribers-only service is inspired by the fact that the cable shows are worried that Web access would "prompt people to drop their cable subscriptions."
In other words, they don't think they can offer a better experience than you can get online. Have they heard of HDTV and wide screens?
BW quotes Mark Cuban as saying Hulu was a good start, "But it has run its course." Cuban's always such an optimist.
Another BW comment:
The betting among analysts is that sooner or later Hulu will ditch its open model in favor of a closed one. Most likely, they say, the site will be made available only to paying cable and satellite subscribers under a model the industry has dubbed TV Everywhere.
Paid TV Everywhere, you mean.
The reason Hulu has succeeded so far is because Kilar has been able to run the show. Give credit to the network owners who realized they hadn't a clue as to how to start the service. Fast Company has a revealing Kilar/Hulu profile "Can Hulu Save Traditional TV?" It says:
Initially, [Viacom, NBC and Fox] stuck to the corporate playbook, assigning teams from various departments at both networks to strategize. A few months in, more than 100 staffers met at the W Hotel in midtown Manhattan. It did not go well. What Mike Lang, a News Corp. executive vice president and NewCo board member, saw was a pileup of competing visions designed to protect existing turf. We're dead, he thought to himself.
So they came up with Kilar, who initially turned them down, worried he would not get enough independence. But he got it -- at least at first. He got rid of most of the 45 consultants the owners had put on the job and insisted that Hulu should also be able to take viewers to shows on non-owner sites, like CBS. They thought he was crazy, but went along.
But the owners are getting impatient, unlike Bezos, who was willing to build up traffic without profits for five years. The owners are now hedging. According to FC:
"He always thinks about the customer and the customer experience," Zucker says of Kilar. "That's his singular focus." Pause. "I wish he were as focused on the monetization."
Zucker grins, backing off. "Which he is." It's another joke. Sort of.
Zucker says flatly that the amount of advertising and the ad rates on Hulu must increase.
Networks and cable companies fear that if people can watch Hulu streams of their shows on TV with fewer ads, they won't tolerate the ads on TV. "I want to be very careful here," [NBC Universal CEO Jeff] Zucker says when I ask about convergence. He bridges his fingers, thinking. A moment later: "In some form, that's clearly going to happen. It's a question of how we navigate that migration."
Hedge, hedge, hedge.
They're all worried about cannibalization, although FC says NBC and Fox have not yet seen any, and, in fact, may have seen some programs boost ratings because of Hulu. Who wants to watch "Fast Forward" or "24" if they forgot to Tivo past episodes? And yet, many of the networks give Hulu the rights to just the most recent five episodes.
The networks also pressured Hulu into banning Boxee. Kilar said to FT, "Boxee had no right to do what it was doing." but on his blog he admitted when announcing the change: "This has weighed heavily on the Hulu team."
The best thing the network executives could do would be to let Kilar run his business the best way he knows how, and to run their businesses the best way they know how, constantly offering a better TV experience than you can get online.
But I wouldn't count on it.
